Regions may issue bonds next year<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Local administrations will be permitted to issue bonds and seek
\nloans from domestic banks starting next year, following the
\nissuance of the necessary ancillary regulations later this year.<\/p>\n
The package of regulations is likely to be issued sometime
\nsoon to help compensate for the current ban on local
\nadministrations seek loans from abroad, with the exception of
\nNanggroe Aceh Darussalam.<\/p>\n
The central government's intentions were conveyed by President
\nSusilo Bambang Yudhoyono during his address to members of the
\nRegional Representatives Council (DPD) on Tuesday.<\/p>\n
\"It is important for me to emphasize that for reasons of
\nmacroeconomic prudence and stabilization, for the time being
\nlocal governments will not be allowed to directly seek foreign
\nloans until such time as the necessary regulations for this have
\nbeen finalized,\" said Susilo.<\/p>\n
Based on the Intergovernmental Fiscal Balance Law, which was
\nendorsed by the House of Representatives in September of last
\nyear, local administrations are allowed to raise money
\ndomestically, including through bond issues, pending the
\ncompletion of the package of regulations.<\/p>\n
Several rich provinces, including Riau, East Java and East
\nKalimantan, have urged the central government to speed up
\nthe issuance of the regulations in order for them to be able to
\nissue bonds to finance their development projects, mostly
\ninvolving infrastructure.<\/p>\n
The provinces say such financial freedom is essential as they
\ncan no longer depend on the cash-strapped central government to
\nimprove infrastructure in their regions.<\/p>\n
Meanwhile, head of the Ministry of Finance's Economic,
\nFinancial and International Collaboration Studies Agency, Anggito
\nAbimanyu, said the regulations would be issued later this year.<\/p>\n
\"We expect that local administrations will be able to issue
\nbonds and seek bank loans starting next year. This is to reduce
\nthe disparity in the availability of financial resources between
\nthe central and local governments,\" said Anggito.<\/p>\n
It is expected that the final say on the value of bond issues
\nand loans will be in the hands of the central government.<\/p>\n
The central government will also select rating agencies to
\nassess the risks involved, he added.<\/p>\n
The regulation will also require local governments to comply
\nwith the prevailing regulations, such as those set out in the
\nCapital Markets Law, and that the bonds be issued in rupiah.<\/p>\n
Anggito also said that the central government would not
\nunderwrite the bonds.<\/p>\n
Elsewhere during his speech to the DPD, President Susilo
\nemphasized the need for local administrations to help the
\ngovernment out in providing fuel subsidies by allocating part of
\ntheir revenues from the oil and gas sector for the development of
\npublic services in poorer areas.<\/p>\n
Under the law as it currently stands, a local administration
\nreceives 15 percent of the oil revenue and 30 percent of the gas
\nrevenue from the oil and gas it produces, while the central
\ngovernment gets the remainder. In return, however, the government
\nhas to shoulder the huge burden of paying for fuel subsidies.<\/p>\n
\"With high global oil prices, some oil and gas-producing
\nregions are receiving windfall profits. I hope they can share
\nthese profits with poorer regions as the central government is
\nfacing straightened circumstances as a result of higher fuel
\nsubsidy spending,\" said Susilo.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/regions-may-issue-bonds-next-year-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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